Best Option for 5 Unit Apartment Building

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Nate HerndonPro Member
Lender · Springfield, MO · Member since 2023 · 277 posts · 195 votes
1y

@Zachary Russell here's a quick example of the 5-8 unit program that I utilize most frequently for commercial multifamily:

• 75% LTC
• 7.75% interest rate on 30-year fixed term
• 1.20+ DSCR minimum
• Basic DSCR calculation, no expense load: DSCR = Income ÷ PITI
• $350,000 minimum property value ($250k min. loan amount)
• 80% occupancy requirement

[email protected]417-605-2196
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  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    1y
    Quote from @Zachary Russell:

    Are there any DSCR programs for a 5 unit apartment building? Of those that exist, what about 20% down and amortized over 30 years? I'm under contract and ready to go.


     Yes, we recently did two of them for some borrowers. Typically they will need to go to 25% down though, might be able to sneak in 20 but the rate will be higher - also not rates are higher on 5 units than 4 units or less - so just be aware. 

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    • Zachary Russell
      OP
      Member since 2022 · 9 posts · 4 votes
      1y
      Quote from @Chris Seveney:
      Quote from @Zachary Russell:

      Are there any DSCR programs for a 5 unit apartment building? Of those that exist, what about 20% down and amortized over 30 years? I'm under contract and ready to go.


       Yes, we recently did two of them for some borrowers. Typically they will need to go to 25% down though, might be able to sneak in 20 but the rate will be higher - also not rates are higher on 5 units than 4 units or less - so just be aware. 


       Great! I just filled out your form. It's not the rate that's most important to me, but rather finding a 20% down option over 30 years.

      0Reply
  • Devin PetersonBusiness Member
    Lender · Sarasota, FL · Member since 2022 · 2k+ posts · 665 votes
    1y
    Quote from @Zachary Russell:

    Are there any DSCR programs for a 5 unit apartment building? Of those that exist, what about 20% down and amortized over 30 years? I'm under contract and ready to go.


    Zachary, lots of options I would recommend connecting with an experienced loan broker on all the DSCR possibilities.

    [email protected]860-538-3672
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  • Nate HerndonPro Member
    Lender · Springfield, MO · Member since 2023 · 277 posts · 195 votes
    1y

    @Zachary Russell here's a quick example of the 5-8 unit program that I utilize most frequently for commercial multifamily:

    • 75% LTC
    • 7.75% interest rate on 30-year fixed term
    • 1.20+ DSCR minimum
    • Basic DSCR calculation, no expense load: DSCR = Income ÷ PITI
    • $350,000 minimum property value ($250k min. loan amount)
    • 80% occupancy requirement

    [email protected]417-605-2196
    2Reply
  • Alex BekezaBusiness Member
    Lender · Los Angeles, CA · Member since 2018 · 2k+ posts · 1k+ votes
    1y

    There sure are. Most investors are surprised to find out they can get a true 30 year fixed note on an apartment building. 80% is available in the right circumstances but I'd say there's usually a huge rate benefit to 75% LTV.

    [email protected]818-606-8823
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    • Zachary Russell
      OP
      Member since 2022 · 9 posts · 4 votes
      1y
      Quote from @Alex Bekeza:

      There sure are. Most investors are surprised to find out they can get a true 30 year fixed note on an apartment building. 80% is available in the right circumstances but I'd say there's usually a huge rate benefit to 75% LTV.


       I'm happy to discuss further. This property is $355,000. I'd be willing to take a higher rate to get the lower down payment.

      0Reply
  • Zach Berry
    Lender · Pittsburgh, PA · Member since 2024 · 63 posts · 20 votes
    1y

    Zach - congrats on the deal. I can do DSCR on 5-10 unit buildings, I just need a minimum loan amount of 400k, which sounds like isn't possible here. Hit me up on the next one!

    0Reply
  • Erik EstradaBusiness Member
    Lender · Member since 2022 · 6k+ posts · 1k+ votes
    1y

    The Loan Amount will be the biggest hurdle. You can do under $250k loan however, be prepared to put at least 30% down if the seller is not willing to carry a 2nd. If he is, you can go up to 90% CLTV. (1st at 70% LTV/ 2nd at 20% LTV).

    [email protected]818-269-7983
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  • Rich Davis
    Member since 2024 · 23 posts · 9 votes
    1y

    Zach,

    Are you new to Lewiston?  I have multiple buildings here.  if you want inside intel, let's grab lunch.

    0Reply
  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    1y

    Who did you go with ?

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    • Zachary Russell
      OP
      Member since 2022 · 9 posts · 4 votes
      1y
      Quote from @Chris Seveney:

      Who did you go with ?

      The local bank ended up being the best option. 20% down, 7.25% interest rate amortized over 20 years, 5 year ARM of prime +1% (which can adjust down, not just up). Every five years I can take that adjusted rate with them for a $250 fee, or I have the option to refi with someone else at that point in time.

      While the 20 year amortization eats into the profits a bit, I should still take home around $30,000/year given the current $73,200/year rental income, with room to push rent to $81,000. I don’t have more than 20% to comfortably put down, so until I learn to leverage more of OPM, this gets my foot in the door. 
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